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The recession that began in December 2007, and the loss of 5.1 million jobs since, has raised
issues about policies to address the threats to the economic security of people and families from
an economic downturn. The unemployment rate had already reached 8.5% in March 2009, with
the Congressional Budget Office (CBO) forecasting that it will top out at over 9% in early 2010.
Families that were economically disadvantaged before the recession are highly likely to face risks
to their well-being—unemployment rates for women maintaining families, minorities, and those
with less than a high school education are above the average for all workers.
The emphasis of public policy for low-income families with children with able-bodied parents is
supporting and requiring work. The system of needs-based cash benefits underwent major
changes over several decades, culminating in policy changes in the mid-1990s that included the
major welfare reform law of 1996. The current recession will likely be the first real test of how
policies put in place in the mid-1990s affect the well-being of families with children during a
steep economic downturn and high unemployment. Unemployment insurance (UI) is the major
program to replace lost wages for unemployed workers. However, low-wage workers and those
with intermittent employment are less likely to receive UI than higher-wage workers with
stronger labor force attachment. In the past, the “safety net” for families with children included
cash welfare. The 1996 welfare reform law created the Temporary Assistance for Needy Families
(TANF) block grant with fixed funding and altered rules that apply to the cash welfare caseload
and gave states enhanced flexibility in designing benefits and services for needy families with
children. The cash welfare caseload declined by two-thirds from 1994 to 2008 and stood at 1.7
million families in September 2008. The share of poor children receiving TANF plummeted from
over 60% before welfare reform to 23% by 2007.
The American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5) provides states with
incentives and funds to rethink the safety net for disadvantaged families with children. First, it
provides states with funding incentives to expand UI for low-income workers. This permits states
to expand social insurance to respond to the recession. ARRA also provides additional funding to
the states through TANF to finance recession-related expenditures. It establishes a temporary
“emergency” contingency fund that will reimburse states for 80% of increased expenditures for
basic assistance, non-recurrent short-term benefits, and subsidized employment expenditures.
Emergency funds for basic assistance are contingent on increases in the basic assistance caseload.
ARRA’s new funds to pay for increased basic assistance caseloads—basic assistance often takes
the form of traditional cash welfare for needy families with children—have raised the question of
whether the newly available funds will serve to promote welfare dependency. Historically, cash
welfare caseloads often increase when unemployment increases, so it could be argued that the
additional funds will pay for caseload rises caused by systemic economic forces (e.g. a world-
wide recession). However, concerns about increasing welfare dependency, as well as concerns
that traditional cash welfare might not meet the needs of those thrown into poverty by the
recession, could lead to debates at the state level about how best to use these new TANF funds.
Since TANF provides states with broad flexibility, ARRA’s additional TANF funding could be
used for new programs, such as short-term benefits, subsidized employment programs, and
community service programs, in addition to or instead of increased traditional cash welfare. This
report will be updated.

ȱȱȱ

ȱȱȱȱȱȱȱ ȱȱȱȱ
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ȱ
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Introduction ..................................................................................................................................... 1
The Recession and the Economic Insecurity of Disadvantaged Families ....................................... 1
Public Policy Toward Low-Income Families with Children: Rewarding and Requiring
Work....................................................................................................................................... 1
The Recession, Unemployment, and the Economically Disadvantaged ................................... 2
A Safety Net for Disadvantaged Families with Children? ........................................................ 4
The American Recovery and Reinvestment Act of 2009 and Disadvantaged Families
with Children ......................................................................................................................... 6
TANF Funding and Recessions ....................................................................................................... 7
The 1996 Law and Extra TANF Funding for Recessions ......................................................... 8
The TANF “Emergency” Contingency Fund Established By The ARRA ................................ 9
Expanding TANF’s Role to Respond to a Recession?................................................................... 12
Cash Welfare for Needy Families With Children.................................................................... 14
Cash Welfare Benefit Amounts......................................................................................... 17
Requirements to Receive Cash Welfare............................................................................ 19
Potential Concerns ............................................................................................................ 20
Other Forms of Economic Support from TANF in the Recession .......................................... 20
Non-Recurrent Short-Term Benefits................................................................................. 20
Subsidized Employment ................................................................................................... 21
Other Activities ................................................................................................................. 21
Legislative Issues .......................................................................................................................... 22
Solvency of the Regular Contingency Fund ........................................................................... 22
Penalties for Failure to Meet FY2007 and FY2008 Work Participation Standards................. 22

ȱ
Figure 1. Child Poverty and Unemployment Rates, 1959 to 2007.................................................. 4
Figure 2. Child Recipients of Cash Welfare, SNAP/Food Stamps, and Medicaid, FY1995
and FY2007 .................................................................................................................................. 6
Figure 3. FY2006 Use of TANF Funds and MOE Expenditures..................................................... 8
Figure 4. Number of Families Receiving Cash Welfare and the Unemployment Rate,
1959 to 2008............................................................................................................................... 14

ȱ
Table 1. Unemployment Rates for Selected Groups........................................................................ 3
Table 2. TANF State Family Assistance Grant, Regular Contingency Fund, and
Emergency Contingency Fund Limits (FY2009-FY2010)......................................................... 10
Table 3. Number of Families Receiving TANF Cash Assistance, September 2007 and
September 2008.......................................................................................................................... 15
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Table 4.Monthly TANF Cash Welfare Maximum Benefit Amount for a Family of Three,
2008............................................................................................................................................ 17

ȱ
Author Contact Information .......................................................................................................... 22
Acknowledgments ......................................................................................................................... 23

ȱȱȱ

ȱȱȱȱȱȱȱ ȱȱȱȱ
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It is now generally acknowledged that the economy entered recession in December 2007, and has
since lost 5.1 million jobs. In January 2009, the Congressional Budget Office (CBO) issued its
economic outlook, forecasting that this recession will be the longest and, by some measure,
deepest since World War II, with unemployment rates topping 9% by early 2010.1 This has raised
the profile of economic insecurity caused by the recession. Individuals and families who were
economically disadvantaged before the recession hit are particularly at-risk of economic
insecurity.
This report discusses the potential role that the Temporary Assistance for Needy Families (TANF)
block grant to states may play in mitigating the effects of the recession for poor families with
children. The TANF block grant is best known as a funding source for cash welfare. However, it
also funds a wide range of benefits, services, and activities for disadvantaged families with
children, as well as programs to achieve the goals of reducing out-of-wedlock pregnancies and
promoting two-parent families.
ȱȱȱȱȱ¢ȱȱ
ȱȱ
Many children were in families that were already poor as the economy entered recession. The
child poverty rate in 2007, the last full year of an economic expansion that dated back to 2001,
stood at 17.6%—higher than the rate for the elderly (9.7%) or that for non-aged adults (10.9%).
High poverty rates among families with children are correlated with certain characteristics.2
Children in female-headed families are more likely to be poor than those in married couple
families. Additionally, those in families with young parents, parents with low levels of
educational attainment, and racial and ethnic minority children were more likely to be poor than
their counterparts in other groups.
ȱ¢ȱ ȱ Ȭȱȱ ȱǱȱ
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While some poor families lacked a wage earner, more than two-thirds of poor children were in
families where the head or spouse worked at some point during 2007. Current public policy
toward low-income families with able-bodied adults emphasizes work. This work-based approach
toward economic disadvantage and poverty among children evolved over several decades,
culminating in several legislative initiatives in the mid-1990s. The Earned Income Tax Credit
(EITC), an earnings supplement usually received as a tax refund, was expanded and its amount
increased by legislation in 1993.3 Health care from Medicaid was gradually expanded to cover all

1 Congressional Budget Office, The Economic and Budget Outlook 2009-20019, January 2009, http://www.cbo.gov/
ftpdocs/99xx/doc9957/01-07-Outlook.pdf.
2 CRS Report RL32682, Children in Poverty: Profile, Trends, and Issues.
3 CRS Report RL31768, The Earned Income Tax Credit (EITC): An Overview, by Christine Scott.
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poor children, followed by legislation in 1997 that established the State Children’s Health
Insurance Program (SCHIP).
The TANF cash welfare system of today reflects a historical legacy of controversy. Federal
involvement in funding cash welfare for needy families dates back to the Great Depression, and
concern about risks to the economic security of families. At the time, the major risk addressed by
policy was the loss of the earnings of one parent (the father) because of death. However,
“welfare” issues were entwined with many of the social changes in the second half of the 20th
Century. The increase in women’s labor force participation raised the expectation that mothers
heading families work. Welfare raised racial issues, as an increasing share of the welfare caseload
became nonwhite. Payments that went primarily to fatherless families also raised issues of
personal responsibility and morality. Welfare increasingly became a program associated not with
economic risks, but with the personal characteristics and behavior of its recipients.
The 1996 welfare reform law (P.L. 104-193) substantially altered the policy landscape for low-
income families. It ended the New Deal program of Aid to Families with Dependent Children
(AFDC) and with it the entitlement to needy families for cash assistance. AFDC was replaced by
the TANF block grant, with work participation requirements and time limits for cash welfare
recipients. The 1996 welfare reform also significantly increased federal funding to the states to
subsidize child care, further supporting work among low-income families.
Partially as a result of the policies put into place in the mid-1990s, and partially as a result of the
economic boom that followed, the welfare caseload plummeted and work among single mothers
increased.4 In September 2008, the cash welfare caseload had fallen to 66% below the September
1994 caseload figure. Child poverty declined from 1994 through 2000, but the welfare rolls
declined faster. As a result, fewer poor children were in families receiving cash welfare, though a
greater proportion of poor children were in families with earnings. The period after 2000 saw
slower economic growth than in the late 1990s and child poverty rose, but the welfare rolls still
declined. In 2007, the welfare recipiency rate among poor children stood at 23%—down from
about 60% before welfare reform.
ȱǰȱ¢ǰȱȱȱ¢ȱ
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The current recession is the second one to test the work-based policies put into place in the mid-
1990s and directed toward poor families with children. The first recession was the relatively mild
one in 2001. The unemployment rate in this recession – standing at 8.5% in March 2009 – already
far surpasses the peak unemployment rate of 6.3% reached in 2003 after the 2001 recession.5
Table 1 provides the unemployment rate for all workers, and then for some groups that are at risk
of being economically disadvantaged. Over the past year, unemployment rates for all groups have
increased as the economy slumped. As expected, those in groups at risk for being economically

4 For statistics on the prevalence of work and receipt of cash welfare over this period, see CRS Report RL30797,
Trends in Welfare, Work, and the Economic Well-Being of Female-Headed Families with Children: 1987-2006, by
Thomas Gabe.
5 Unemployment rates, like other indicators of family economic distress, including the poverty rate, tend to be lagging
indicators of economic activity. That is, they tend to peak some time after economic activity reaches its low point,
which marks the end of a recession.
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disadvantaged had higher unemployment rates than the overall population. These groups—
women maintaining families, those with no high school diploma, African-Americans, Hispanics,
and young adults had double-digit unemployment rates. Though not all unemployed workers in
at-risk groups are in families with children, many are.
Table 1. Unemployment Rates for Selected Groups
(data seasonally adjusted unless otherwise noted)
Demographic
Unemployment
Unemployment
Unemployment
Group
Rate: Dec. 2007
Rate: Feb. 2009
Rate: Mar. 2009
All workers
4.9%
8.1%
8.5%
Women
6.9 10.3
10.5
maintaining families
(not seasonally
adjusted)
No high school
7.5 12.6
13.3
diploma (25 years
and older)
African-American
7.6 12.3
12.5
(20 years and
older)
Hispanics (16 years
6.2 10.9
11.4
and older)
Young adults (20
9.2 12.9
14.0
to 24 years old)
Source: Congressional Research Service (CRS) based on data from the U.S. Department of Labor, Bureau of
Labor Statistics.

The most visible indicator of economic disadvantage is the poverty rate. Historically, child
poverty rates have increased during recessions and fallen during periods of economic growth. The
child poverty rate tends to peak soon after the low-point of the economic cycle. During the
decade of the 1980s, the child poverty rate peaked in 1983, a year after the end of the back-to-
back recessions of 1980 and 1981-82, and in the 1990s it peaked in 1993, two years after the
1990-91 recession.
Figure 1 shows the historical trend in the child poverty rate and compares it with the trend in the
unemployment rate. While there is a clear association between the two indicators, the child
poverty rate is affected by more than just the national economy. The child poverty rate remained
high in the 1980s, as the percent of children living in female-headed families increased. After the
2001 recession, child poverty increased from its low point of 15.6% in 2000 to 17.3% in 2004,
before falling for a couple of years, and then rising again to 17.6% in 2007.
ȱȱȱ
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Figure 1. Child Poverty and Unemployment Rates, 1959 to 2007
Poverty Rate is on the Left Axis, Unemployment Rate is on the Right Axis
Child Poverty Rate
Unemployment Rate
30%
16%
14%
25%
Child Poverty Rate
12%
(left axis)
20%
000000000000000000
000000000000000000
0000000000
10%
000000000 0000000000
0000000000
000000000
000000000 0000000000
0000000000
000000000
000000000 0000000000
0000000000
000000000000000000
000000000 0000000000
15%
0000000000
000000000000000000
000000000000000000 0000000000
000000000
000000000
0000000000 Unemployment
8%
0000000000 000000000000000000 0000000000
000000000
000000000000000000000000000
000000000
0000000000
0000000000
0000000000
000000000
0000000000
000000000 0000000000
000000000000000000
000000000000000000
0000000000
0000000000Rate (right axis)
0000000000
000000000
0000000000
000000000
0000000000
0000000000
000000000000000000
000000000
0000000000
000000000
0000000000
000000000000000000000000000
0000000000
000000000
0000000000
000000000
0000000000
0000000000
000000000000000000
000000000
0000000000
000000000
0000000000
0000000000
000000000
000000000
0000000000
000000000000000000000000000
0000000000
000000000000000000000000000
0000000000
0000000000
0000000000
000000000
0000000000
000000000000000000
000000000000000000000000000
0000000000
0000000000
000000000000000000
6%
000000000000000000
0000000000
0000000000 000000000000000000
0000000000
000000000
000000000000000000
0000000000
0000000000
000000000000000000
10%
000000000
0000000000
0000000000
0000000000 000000000000000000
000000000
0000000000
000000000
0000000000
000000000
0000000000
000000000
0000000000
0000000000
0000000000
000000000000000000000000000
000000000
0000000000
0000000000
000000000000000000 0000000000
000000000000000000000000000
0000000000
000000000000000000000000000
0000000000
4%
5%
2%
0%
0%
9
1
9
1
3
3
5
7
9
1
3
5
7
195 196 196319651967196 197 197 1975197719791981198 198 198 19891991199319951997199 200 200 200 200

Source: Congressional Research Service (CRS) based on data from the U.S. Department of Commerce, Bureau
of the Census, and the U.S. Department of Labor, Bureau of Labor Statistics.

ȱ¢ȱȱȱȱȱ ȱǵȱ
There is cause for concern about the state of the “safety net” for workers and families who were
economically disadvantaged before the recession. Unemployment insurance (UI) is the primary
government program to help the involuntarily unemployed replace a portion of their lost earnings.
However, UI was not designed to provide benefits to all unemployed persons. New entrants and
those re-entering the workforce after prolonged absences are not eligible for UI. Even among job
losers, UI receipt is not universal. UI requires sufficient recent employment (and a minimum
amount of earnings in a recent period) to be eligible for benefits upon becoming unemployed.
Additionally, some unemployed persons already have exhausted their weeks of unemployment
benefits. In February 2009, the percent of the unemployed receiving unemployment benefits was
55%.6
Research shows that low-wage workers, part-time workers, and women, have lower rates of UI
receipt when they become unemployed.7 Additionally, policies to increase the financial rewards

6 This number reflects the UI from all programs: regular state UI, federal-state extended benefits, and emergency
unemployment compensation (EUC) benefits.
7 See U.S. Government Accountability Office. Unemployment Insurance: Role as Safety Net for Low-Wage Workers is
Limited, GAO-01-181, December 2000. See also: U.S. Government Accountability Office, Unemployment Insurance:
(continued...)
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from work and the welfare reforms of the 1990s helped spur more single mothers into the
workforce. Those who leave welfare for work often fail to stay employed. Studies of those who
left welfare indicate that, among those who left welfare for work, only between 30% and 50%
stayed employed all four quarters after leaving the rolls.8 A study of welfare leavers in four large
states (Florida, Ohio, Michigan, and Texas) showed that of all welfare leavers who became
unemployed, only 13% drew UI.9 Less than 25% of unemployed leavers applied for UI. Most of
those who applied for UI were monetarily eligible (earned sufficient wages), but many failed to
receive unemployment benefits for other reasons. Voluntarily quitting a job often disqualifies a
person from receiving UI, and in many states a person who quits for “family” reasons (e.g. caring
for a sick child, need to align hours to accommodate family responsibilities, etc.) cannot receive
UI. During a recession, those who leave jobs for such reasons have to compete in a more difficult
labor market along with others. Many states also bar unemployed persons available only for part-
term work from receiving UI.
The second tier of the safety net for families with children are programs that provide benefits
based on financial need. Before the economy entered recession, poor children were far more
likely to be in families receiving benefits from the food stamp program (now renamed
Supplemental Nutrition Assistance Program, or SNAP), and health care than cash welfare. Figure
2 shows the number of children in families receiving cash welfare, compared with children in
SNAP/Food Stamp households and children enrolled in Medicaid in both FY1995, before the
enactment of welfare reform, and FY2007. The other two programs had more child recipients
than cash welfare in both years. However, by FY2007 the number of children benefitting from
SNAP/food stamps and Medicaid dwarfed the number of children in families receiving cash
welfare. By FY2007 there were 3.1 million children in families receiving cash welfare, compared
with the 12.7 million children in food stamp households and the 23.5 million children enrolled in
Medicaid.

(...continued)
Receipt of Benefits Has Declined, with Continued Disparities for Low-Wage and Part-Time Workers, GAO-07-1243T,
September 19, 2007.
8 U.S. Department of Health and Human Services, Office of the Secretary, Office of the Assistant Secretary for
Planning and Evaluation, Final Synthesis Report of Findings from ASPE’s “Leavers” Grants, December 2001, pp. 23-
44.
9 See Christopher J. O'Leary and Kenneth J. Kline, UI as a Safety Net for Former TANF Recipients, W.E. Upjohn
Institute for Employment Research, Kalamazoo, MI, March 2008, http://aspe.hhs.gov/hsp/08/UI-TANF/report.pdf.
ȱȱȱ
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Figure 2. Child Recipients of Cash Welfare, SNAP/Food Stamps, and Medicaid,
FY1995 and FY2007
(monthly average number of children in millions)
23.5
25
20
16.5
13.8
15
12.7
9.3
10
5
3.1
0
1995
2007
Cash Welfare
SNAP/Food Stamps
Medicaid

Source: Congressional Research Service (CRS) based on data from the U.S. Department of Health and Human
Services (HHS), Administration for Children and Families; HHS, Center for Medicare and Medicaid Services; and
U.S. Department of Agriculture.

ȱȱ¢ȱȱȱȱȱŘŖŖşȱȱ
ȱȱ ȱȱ
The American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5) provides states with
incentives and funds to rethink the safety net for disadvantaged families with children.10 It does
so through provisions that affect both tiers of the safety net—social insurance and need-based
assistance. In particular, disadvantaged families with children could be affected by ARRA’s
provisions to enhance UI for low income families, provide additional TANF funding to allow the
expansion of need-based assistance, or both. The UI and TANF provisions give states new options
to address the economic needs of disadvantaged families; states could exercise them or leave the
status quo alone.
Social insurance programs are the primary source of economic aid to mitigate the risk of the loss
of earnings, with benefits earned through work in covered employment. Though these benefits do
affect incentives to work and save, they generally do not conjure up the same issues of “welfare
dependency” that need-tested benefits do.
The ARRA includes several provisions that can enhance UI for low-wage workers. It provides
federal funding for a $25 per week increase in the weekly UI benefit. It also provides incentive
grants to states that permit those with shorter work histories, those available only for part-time

10 For an overview of ARRA’s provisions affecting human services programs, see CRS Report R40211, Human
Services Provisions of the American Recovery and Reinvestment Act, by Gene Falk et al.
ȱȱȱ
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ȱȱȱȱȱȱȱ ȱȱȱȱ
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employment, and those who lose their jobs for “compelling family reasons” to receive UI upon
becoming unemployed. States also can receive incentive grants, in part, based on providing
dependents’ allowances that would raise benefits for families with children.11
The remainder of this report will focus on the TANF provisions of the ARRA. However, should
the state expand UI for low-wage workers, the economic needs of disadvantaged families might
be lessened and the role of TANF in helping these families could be smaller.
ȱȱȱȱ
In creating TANF in the 1996 welfare law, Congress converted open-ended matching grants
(unlimited funding) for AFDC cash welfare, emergency assistance, and a capped matching grant
for employment and training services for cash welfare recipients into a single block grant to help
needy families. The TANF block grant provides states with fixed funding but broad authority to
use federal TANF funds (and associated state funds) on a wide range of benefits and services to
aid needy families and to reduce out-of-wedlock pregnancies and promote two-parent families.
The 1996 welfare reform law set the TANF basic block grant at $16.5 billion, which together with
a requirement that states maintain at least $10.4 billion in spending from their own funds, has not
changed since TANF’s inception. That basic block grant and the state maintenance of effort
(MOE) requirement constitute the bulk of TANF funding to the states. TANF also includes some
additional funding sources, including a limited contingency fund (discussed in detail below) and
supplemental grants that have totaled $319 million and have been targeted to 17 states.
The fixed nature of TANF funding imposes financial risk on states. Absent additional funding,
states bear the risk of an increase in recession-related costs, including increases in the cash
welfare caseload. To pay for increased costs in a recession, states either have to cut other human
services funded through TANF or increase spending from their own funds. TANF funds have
been used for a wide range of human services that either seek to address the root cause or
ameliorate the effects of economic disadvantage among families with children. These
initiatives—launched in better economic times—are at risk in states that need to reallocate TANF
funds toward economic assistance during a recession.
Figure 3 shows the use of TANF grants and MOE spending for FY2006. As shown on the figure,
basic cash assistance (what most people call cash welfare) accounted for only 35% of all TANF
and MOE funds in that year. Even when also counting expenditures on administration and work
activities (the other categories associated with traditional welfare programs), only a little more
than half of all TANF and MOE funds are accounted for. A second major category of TANF
funding is work supports—particularly child care. Child care—either through expenditures or
transfers to the Child Care and Development Fund—accounts for almost one-fifth (19%) of total
TANF and MOE spending.12 Other work supports, such as the refundable portion of state tax
credits for low wage workers and transportation aid, account for an additional 6% of all funds
spent.

11 CRS Report R40368, Unemployment Insurance Provisions in the American Recovery and Reinvestment Act of 2009,
by Alison M. Shelton, Kathleen Romig, and Julie M. Whittaker
12 The ARRA added $2 billion in funding for the Child Care and Development Fund. These extra funds also could free
up TANF dollars for recession-related benefits and activities.
ȱȱȱ
ŝȱ

ȱȱȱȱȱȱȱ ȱȱȱȱ
ȱ
Figure 3. FY2006 Use of TANF Funds and MOE Expenditures
(as a percent of total used TANF funds and MOE expenditures)
Total Transfers and Expenditures = $28.4 billion
Transfers to
SSBG
Other
3%
expenditures
17%
Basic (cash)
assistance
Family formation
35%
expenditures
3%
Other work
supports
6%
Transfers to
Administrative
CCDF
expenditures
7%
9%
Child care
Work program
expenditures
expenditures
12%
8%

Source: Congressional Research Service (CRS) based on data from the U.S. Department of Health and Human
Services (HHS).

The categories shown on the figure above are based on reports to HHS made by states on their
TANF expenditures. However, the categories poorly capture some benefits, activities, and
services provided under TANF. For example, TANF makes a substantial contribution to programs
that deal with child abuse and neglect—but that is not captured in the reporting system. A survey
by the Urban Institute for state FY2004 reported that TANF contributed at least $3 billion to those
programs.13 Also not captured in the expenditure reports and categories is the breadth of benefits
and services funded, particularly in the categories labeled “family formation” and “other.” TANF
is used on a wide range of human services programs that address issues faced by disadvantaged
families or children: home visiting programs for new parents; youth services, such as grants to
Boys and Girls Clubs; pre-Kindergarten education programs; after-school programs for teens;
responsible fatherhood programs, such as employment services and training for noncustodial
parents; and marriage education and counseling.
ȱŗşşŜȱ ȱȱ¡ȱȱȱȱȱ
TANF has two major sources of extra funding in case the fixed block grant is insufficient to cover
costs for any period. The 1996 law allowed states to save unspent TANF monies, without fiscal
year limit. As of September 30, 2007 (the latest available data), TANF reserves nationwide totaled
$1.7 billion. At that time, 12 states held no reserves. Additionally, the national total represents

13 These programs are known as “child welfare” programs, and the Urban Institute survey figure reflects the TANF
funds that are used by state and local child welfare agencies.
ȱȱȱ
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ȱȱȱȱȱȱȱ ȱȱȱȱ
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only a small percentage of total federal and MOE funds (of about $28 billion) expended under
TANF in a year.
Before the enactment of the ARRA, states could use these reserves only for the purposes of
providing assistance (mostly commonly, traditional cash welfare) to families—it could not be
used for the wider range of TANF activities. The ARRA lifted the restriction that reserves only be
used for assistance, allowing them to finance any TANF benefit, service, or activity.
The 1996 law also provided a $2 billion contingency fund, for extra matching grants to states that
meet certain criteria of economic need. At the beginning of FY2009 (October 1, 2008), $1.3
billion remained in the fund. The Congressional Budget Office (CBO) estimated in January 2009,
before the enactment of the ARRA, that $1 billion of the fund would be used in FY2009 and the
fund would be exhausted at some time in FY2010. For the remainder of this report, this fund will
be termed the “regular” TANF contingency fund, because the ARRA established a temporary
“emergency” TANF contingency fund.
States qualify for the regular TANF contingency fund based on economic need. Economic need is
established by either: (1) Supplemental Nutrition Assistance Program (SNAP, formerly known as
food stamps) participation, for the most recent three months for which data are available, that is at
least 10% higher than it was during the corresponding three-month period in either FY1994 or
FY1995; or (2) a three-month average unemployment rate of at least 6.5% and that equals or
exceeds 110% of the rate measured in the corresponding three month period in either the previous
two years.
Though eligibility for the regular TANF contingency fund is based on economic need, the actual
amount of grants a state may receive under the fund is based on its TANF expenditures. States
must spend from their own funds at least 100% of what they spent in FY1994 on the pre-TANF
programs before they qualify for matching funds. Spending above the 100% level is matched at
the Medicaid matching rate (statutorily limited to between 50% and 83%, with the rate inversely
related to a state’s per-capita income). The expenditures that count toward the 100% and
matching requirements are the broad range of TANF expenditures, with the exception of child
care, which is not counted for contingency fund purposes. Annual federal funds from the regular
contingency fund are capped at 20% of a state’s basic annual block grant.
In early April 2009, HHS data indicate that 43 states and the District of Columbia were
economically eligible for the regular TANF contingency fund. The only states that were ineligible
were: Hawaii, Louisiana, Minnesota, New Jersey, Vermont, West Virginia, and Wyoming.
However, HHS reports only 14 states actually drawing from the regular TANF contingency fund:
Arizona, Arkansas, Delaware, Maryland, Massachusetts, Michigan, Nevada, New Mexico, New
York, North Carolina, South Carolina, Tennessee, Washington, and Wisconsin.
ȱȱȃ¢Ȅȱ¢ȱȱȱ¢ȱȱ
ȱ
The ARRA added a new temporary “emergency contingency fund” to TANF for FY2009 and
FY2010. It appropriated $5 billion to the fund for these two years. The emergency contingency
fund will reimburse states for 80% of increased expenditures for basic assistance, non-recurrent
short-term benefits, and subsidized employment expenditures up to a cap. The cap is a cumulative
amount for FY2009 and FY2010, and restricts a state to receiving in both regular and emergency
ȱȱȱ
şȱ

ȱȱȱȱȱȱȱ ȱȱȱȱ
ȱ
contingency funds amounts up to 50% of its annual basic block grant over the two years.
Reimbursement for basic assistance under the temporary emergency fund is contingent upon
increases in basic assistance caseloads. Increased caseloads and expenditures are measured on a
quarterly basis, comparing each quarter in FY2009 and FY2010 to the corresponding quarter in
the base years of FY2007 and FY2008. The applicable base period varies depending on
whichever results in the greatest increase for each state for the basic assistance caseload and by
expenditure category.
Table 2 shows the annual state family assistance grant and the two-year limits on federal funds
for both the regular TANF contingency fund and the combined TANF regular and emergency
contingency funds. The Commonwealth of Puerto Rico and territories of Guam and the Virgin
Islands are ineligible for regular contingency funds, but are eligible for emergency contingency
funds. Additionally (not shown on the table), tribes that operate tribal TANF programs may
receive emergency funds. The table shows that the sum of individual state caps ($8.2 billion)
exceeds available funding ($1.3 billion in remaining regular contingency funds plus the $5 billion
appropriated for the emergency fund).

Table 2. TANF State Family Assistance Grant, Regular Contingency Fund, and
Emergency Contingency Fund Limits (FY2009-FY2010) Combined
Regular
Regular and
Contingency
Emergency Fund
State Family
Fund Limit (Over
Limit (Over 2
State
Assistance Granta
2 Years)b
Years)
Alabama 93.3
37.3
46.7
Alaska 46.4
18.6
23.2
Arizona 200.2
80.1
100.1
Arkansas 56.7
22.7
28.4
California 3,659.9
1,464.0
1,829.9
Colorado 136.1
54.4
68.0
Connecticut 266.8
106.7
133.4
Delaware 32.3
12.9
16.1
District Of Columbia
92.6
37.0
46.3
Florida 562.3
224.9
281.2
Georgia 330.7
132.3
165.4
Guam 3.5
0.0
1.7
Hawaii 98.9
39.6
49.5
Idaho 30.4
12.2
15.2
Illinois 585.1
234.0
292.5
Indiana 206.8
82.7
103.4
Iowa 131.0
52.4
65.5
Kansas 101.9
40.8
51.0
ȱȱȱ
ŗŖȱ

ȱȱȱȱȱȱȱ ȱȱȱȱ
ȱ
Combined
Regular
Regular and
Contingency
Emergency Fund
State Family
Fund Limit (Over
Limit (Over 2
State
Assistance Granta
2 Years)b
Years)
Kentucky 181.3
72.5
90.6
Louisiana 164.0
65.6
82.0
Maine 78.1
31.2
39.1
Maryland 229.1
91.6
114.5
Massachusetts 459.4
183.7
229.7
Michigan 775.4
310.1
387.7
Minnesota 263.4
105.4
131.7
Mississippi 86.8
34.7
43.4
Missouri 217.1
86.8
108.5
Montana 38.0
15.2
19.0
Nebraska 57.5
23.0
28.8
Nevada 43.9
17.6
22.0
New Hampshire
38.5
15.4
19.3
New Jersey
404.0
161.6
202.0
New Mexico
110.6
44.2
55.3
New York
2,442.9
977.2
1,221.5
North Carolina
302.2
120.9
151.1
North Dakota
26.4
10.6
13.2
Ohio 728.0
291.2
364.0
Oklahoma 145.3
58.1
72.6
Oregon 166.8
66.7
83.4
Pennsylvania 719.5
287.8
359.7
Puerto Rico
71.6
0.0
35.8
Rhode Island
95.0
38.0
47.5
South Carolina
100.0
40.0
50.0
South Dakota
21.3
8.5
10.6
Tennessee 191.5
76.6
95.8
Texas 486.3
194.5
243.1
Utah 75.6
30.2
37.8
Vermont 47.4
18.9
23.7
Virgin Islands
2.8
0.0
1.4
Virginia 158.3
63.3
79.1
Washington 381.0
152.4
190.5
West Virginia
110.2
44.1
55.1
Wisconsin 314.5
125.8
157.2
ȱȱȱ
ŗŗȱ

ȱȱȱȱȱȱȱ ȱȱȱȱ
ȱ
Combined
Regular
Regular and
Contingency
Emergency Fund
State Family
Fund Limit (Over
Limit (Over 2
State
Assistance Granta
2 Years)b
Years)
Wyoming 18.5
7.4
9.3

Total
16,387.0
6,523.6
8,193.5
Source: Table prepared by the Congressional Research Service (CRS) based on data from the U.S. Department
of Health and Human Services (HHS).
Notes: Puerto Rico, Guam, and the Virgin Islands are ineligible for regular contingency funds but are eligible for
emergency funds
a. State Family Assistance Grants are as reduced for tribes in the state that operate their own tribal TANF
programs. The figures are as of October 1, 2008 (beginning of FY2009) and might be reduced if additional
tribes opt to run their own TANF programs, or increased if tribes currently opting to run their own TANF
programs opt out.
b. Regular contingency fund limit is 20% of the annual state family assistance block grant per year. Unused
amounts cannot be carried over to subsequent years. The table shows the maximum two-year limit to
compare with the combined regular and emergency contingency fund limit, which is expressed as a
cumulative limit for FY2009 and FY2010.
¡ȱȂȱȱȱȱȱȱǵȱȱ
The 1996 welfare reform law was enacted, in part, out of concern that a part of the population
was chronically welfare-dependent. Research published in the mid-1990s showed that while
many families received cash welfare for only a short period of time, a substantial minority
received welfare for a long time. It was estimated that little more than 1/3 of those who entered
the rolls could be expected to be on the rolls for five years or more.14 Other research showed that
cash welfare provided a disincentive to work, and also affected decisions on whether to marry or
have a child out-of-wedlock (though neither the effect of welfare on work or family formation
could explain more than a small share of the trends in work or marriage among families with
children).15
One of the goals of the TANF block grant is to reduce the dependence on government benefits of
needy parents. Figure 4 shows the trend in the number of families receiving cash welfare and its
relationship to the unemployment rate. It shows that since the enactment of welfare reform in the
mid-1990s, the welfare rolls have declined sharply. In the late 1990s, this decline coincided with
the drop in the unemployment rate. Since 2000, welfare rolls continued to decline until very
recently, regardless of the trend in the unemployment rate. Thus, as measured by the number of
families receiving assistance, welfare dependency is much reduced from the pre-1996 levels.

14 LaDonna Pavetti, Questions and Answers on Welfare Dynamics, Urban Institute, Washington DC, September 11,
1995.
15 For a review of the literature through the early 1990s, see Robert Moffitt, “Incentive Effects of the U.S. Welfare
System: A Review,” Journal of Economic Literature, vol. 30, no. 1 (March 1992), pp. 1-61.
ȱȱȱ
ŗŘȱ

ȱȱȱȱȱȱȱ ȱȱȱȱ
ȱ
Critics of the ARRA provision establishing the temporary emergency contingency fund argue that
the extra funding will provide states with the incentive to increase their welfare rolls. Figure 4
provides a long historical view of the welfare caseload, from July 1959 to September 2008. Over
this period, there are periods when the trends in welfare caseloads moved in tandem with the
unemployment rate, and there are other periods when the trends in the two data series differed.
Most research on the welfare caseloads says that macroeconomic conditions are a factor affecting
caseloads, though much of this research focuses on the period before 2000.16 Therefore, if the
current recession is as deep and as long as forecast, it is likely that the TANF cash welfare would
experience at least some increase. As discussed below, from September 2007 to September 2008,
16 states experienced caseload increases—and this was before ARRA’s emergency fund was
enacted.
However, the history of the cash welfare caseload also shows that a return to economic prosperity
has not always resulted in lower caseloads, such as the trend seen in the 1980s. Other forces,
demographic changes and policy, also affect the caseload.

16 A recent study examined caseload trends through 2005. It concluded that, given the effect of welfare reform policy
changes, the caseload would have declined further had the economy not weakened. (The study also found that much of
the change in the caseload over time is not explained by either the economy or policy. That is, much is still unknown
about what factors influence welfare caseloads.) See Caroline Danielson and Jacob Alex Klerman, “Did Welfare
Reform Cause the Caseload Decline?,” Social Services Review, vol. 82, no. 4 (December 2008), pp. 703-730.
ȱȱȱ
ŗřȱ

ȱȱȱȱȱȱȱ ȱȱȱȱ
ȱ
Figure 4. Number of Families Receiving Cash Welfare and the Unemployment Rate,
1959 to 2008

Number of Families Receiving Cash Welfare
Unemployment Rate
6
20
18
5
Number of Families Receiving Cash Welfare
16
14
4
12
3
10
8
2
6
4
1
Unemployment Rate
2
0
0
l-59
-62
-65
-68
71
-77
-80
-83
86
89
l-92
-95
-98
01
04
l-07
Ju
Jul
Jul
Jul
Jul-
Jul-74 Jul
Jul
Jul
Jul-
Jul-
Ju
Jul
Jul
Jul-
Jul-
Ju

Source: Congressional Research Service (CRS) based on data from the U.S. Department of Health and Human
Services (HHS) and the U.S. Department of Labor, Bureau of Labor Statistics (BLS).

ȱȱȱ¢ȱȱȱȱ
Though the emergency TANF fund can be used for a wide range of economic supports for
families during the recession, its first use is likely to be paying for increased cash welfare
caseloads. In the early months of the recession, cash welfare caseloads did not rise. However, the
national caseload did increase slightly in August and September 2008. Further, 16 states have
seen their cash welfare caseloads increase from September 2007 through September 2008.
California, the most populous state and the state with the largest cash assistance caseload, saw an
increase of 5.8% over this period.
Table 3 shows the number of families receiving TANF cash assistance in September 2007
through September 2008. States are ranked by their percentage change in the caseload, from
greatest to smallest over this period. Massachusetts experienced a 32.7% jump in the caseload
ȱȱȱ
ŗŚȱ

ȱȱȱȱȱȱȱ ȱȱȱȱ
ȱ
over this period. However, 34 states, the District of Columbia, and the Commonwealth of Puerto
Rico had lower caseloads in September 2008 than a year earlier.
The September 2008 caseload data are the latest available data from HHS. They do not reflect the
particularly large job losses that occurred in later months. Further, as evidenced in Figure 4
above, caseload trends often change somewhat after changes in the trends in unemployment.
Thus, these data might not reflect more recent conditions in the states nor the ultimate effect of
the recession on TANF cash welfare caseloads.
Table 3. Number of Families Receiving TANF Cash Assistance, September 2007 and
September 2008
States Ranked in Descending Order of Percentage Caseload Change
Percentage
Change: Sept.
September
September
2007 to Sept.

2007
2008
2008
Massachusetts 46,483
61,700
32.7
Oregon 18,645
22,537
20.9
New Mexico
12,503
14,069
12.5
Delaware 4,034
4,484
11.2
Washington 49,076
54,373
10.8
Florida 46,864
51,012
8.9
Nebraska 6,913
7,477
8.2
South Carolina
14,936
16,119
7.9
California 470,502
497,719
5.8
Maryland 19,630
20,701
5.5
Utah 5,069
5,333
5.2
Ohio 78,129
82,128
5.1
Wyoming 255
260
2.0
South Dakota
2,842
2,887
1.6
Virginia 31,563
31,970
1.3
Maine 12,352
12,355
0.0
Idaho 1,506
1,496
-0.7
Rhode Island
8,107
8,050
-0.7
Hawaii 6,426
6,374
-0.8
North Carolina
24,537
24,294
-1.0
Arizona 36,934
36,467
-1.3
Kentucky 29,492
29,006
-1.6
Arkansas 8,472
8,330
-1.7
Wisconsin 17,824
17,508
-1.8
Alabama 18,104
17,756
-1.9
ȱȱȱ
ŗśȱ

ȱȱȱȱȱȱȱ ȱȱȱȱ
ȱ
Percentage
Change: Sept.
September
September
2007 to Sept.

2007
2008
2008
Indiana 42,058
41,249
-1.9
Montana 3,217
3,136
-2.5
Mississippi 11,658
11,270
-3.3
New Jersey
34,123
32,722
-4.1
New York
156,420
148,548
-5.0
Tennessee 58,244
55,054
-5.5
North Dakota
2,156
2,033
-5.7
Iowa 19,872
18,709
-5.9
Nevada 7,411
6,937
-6.4
Alaska 3,127
2,890
-7.6
West Virginia
9,699
8,928
-7.9
Missouri 39,544
36,359
-8.1
Connecticut 20,322
18,663
-8.2
New Hampshire
4,733
4,324
-8.6
Puerto Rico
12,617
11,488
-8.9
Louisiana 11,023
10,018
-9.1
Georgia 23,600
21,378
-9.4
Kansas 13,892
12,458
-10.3
Colorado 9,355
8,270
-11.6
Michigan 71,892
62,371
-13.2
District of Columbia
6,231
5,346
-14.2
Texas 59,972
51,045
-14.9
Minnesota 26,642
21,015
-21.1
Pennsylvania 60,167
46,895
-22.1
Illinois 26,222
19,034
-27.4
Vermont 4,503
2,934
-34.8
Oklahoma 18,645
7,920
-57.5

Totals 1,728,938
1,705,399
-1.3
Source: Congressional Research Service (CRS) based on data from the U.S. Department of Health and Human
Services (HHS).
Notes: TANF cash assistance caseload includes families receiving assistance from Separate State Programs (SSPs)
other than TANF that have their expenditures counted toward the TANF MOE requirement. Guam currently
does not report caseload data.
ȱȱȱ
ŗŜȱ

ȱȱȱȱȱȱȱ ȱȱȱȱ
ȱ
ȱȱȱȱ
TANF cash benefits represent only a fraction of poverty income. TANF cash welfare can help a
family avoid total destitution, but is unlikely to allow a family to maintain its standard of living
when even a low wage earner loses his or her job.
Under both TANF and its predecessor, AFDC, states set the benefit amounts. States generally
have not raised cash benefits sufficiently to offset the effects of inflation. Therefore, the
purchasing power of these benefits has continued to decline.
Table 4 provides TANF cash welfare benefits by state for 2008. States are ranked by the
maximum benefit as a percent of the 2008 poverty thresholds. Alaska is the state with the highest
maximum benefit amount, providing $923 per month for a family of three, about half of the
poverty-level income for that state. Among the 48 contiguous states and the District of Columbia,
California has the highest maximum benefit, paying $723 per month for a family of three, just shy
of half of the 2008 poverty threshold. The median state (ranked 26th among the 51 jurisdictions) is
New Jersey, which paid $424 per month for a family of three, 29% of poverty-level income.
Mississippi’s $170 per month for a family of three is the lowest in the nation, representing 12% of
poverty-level income.
Table 4.Monthly TANF Cash Welfare Maximum Benefit Amount
for a Family of Three, 2008
Maximum Benefit as
Maximum a Percent of the 2008
State
Benefit
Poverty Threshold
Alaska $923
50.3%
California 723
49.3
Vermont 709
48.3
New York
691
47.1
New Hampshire
685
46.7
Connecticut 674
46.0
Massachusetts 618 42.1
Maryland 565
38.5
Washington 562
38.3
Rhode Island
554
37.8
Hawaii 636
37.7
South Dakota
539
36.8
Minnesota 532
36.3
Wyoming 506
34.5
Utah 498
34.0
Michigan 489
33.3
Maine 485
33.1
Oregon 485
33.1
ȱȱȱ
ŗŝȱ

ȱȱȱȱȱȱȱ ȱȱȱȱ
ȱ
Maximum Benefit as
Maximum a Percent of the 2008
State
Benefit
Poverty Threshold
North Dakota
477
32.5
Montana 472
32.2
New Mexico
447
30.5
Illinois 434
29.6
Kansas 429
29.3
District of Columbia
428
29.2
Iowa 426
29.0
New Jersey
424
28.9
Pennsylvania 421
28.7
Ohio 410
28.0
Virginia 389
26.5
Nevada 383
26.1
Wisconsin 373
25.4
Nebraska 364
24.8
Colorado 356
24.3
Arizona 347
23.7
West Virginia
340
23.2
Delaware 338
23.0
Idaho 309
21.1
Florida 303
20.7
Missouri 292
19.9
Oklahoma 292
19.9
Indiana 288
19.6
Georgia 280
19.1
North Carolina
272
18.5
South Carolina
263
17.9
Kentucky 262
17.9
Texas 244
16.6
Louisiana 240
16.4
Alabama 215
14.7
Arkansas 204
13.9
Tennessee 185
12.6
Mississippi 170
11.6
Source: Center on Budget and Policy Priorities, TANF Benefits are Low and Have Not Kept Pace With Inflation; But
Most States Have Increased Benefits Above a Freeze Level in Recent Years, by Liz Schott and Zachary Levinson,
November 24, 2008.
ȱȱȱ
ŗŞȱ

ȱȱȱȱȱȱȱ ȱȱȱȱ
ȱ
ȱȱȱȱȱ
The receipt of cash assistance for a family triggers a number of requirements on both the state and
the family. This includes TANF work participation requirements, the federal five-year time limit,
and a requirement that the family legally turn over (assign) any rights it has to child support
payments from noncustodial parents to the state as reimbursement for welfare costs. Though
states have some flexibility in how they implement these requirements, the federal rules influence
the design of state programs and the requirements and rules that ultimately apply to individuals.
ȱȱȱ
The TANF work participation standards are numerical performance standards that states must
meet or be subject to a financial penalty. They represent a target percentage of families that must
be engaged in activities (50% of all TANF families with a parent, 90% of two-parent TANF
families), but the statutory standards are reduced for reductions in the TANF assistance caseload.
That is, the standards may be met either by engaging families in activities or reducing the
assistance caseload. A provision called the “caseload reduction credit” reduces the statutory
standards by one percentage point for each percent decline in the caseload since FY2005. The
ARRA temporarily modified the caseload reduction credit, allowing a state that experiences
caseload increases during the recession to “freeze” its credit at its FY2008 value or its largest
value for the period FY2009 through FY2011. This also allows a state to “freeze” the percentage
of its caseload that it must engage in activities at its FY2008 rate, or the lowest rate of the
FY2009 through FY2010 period.
Though the ARRA caseload reduction credit provision has garnered significant attention, also
important is a provision built into the original 1996 law that allows the Secretary of HHS to
reduce the financial penalty for a state that fails to meet the work participation standard if it is
economically eligible for the regular TANF contingency fund. As mentioned above, 44 states and
the District of Columbia are currently economically eligible for the regular TANF contingency
fund.
ȱȱȱ ȱȱȱȱȱ
The activities that count toward the work participation standards for adult (aged 20 and older)
recipients reflect a “work-first” focus. Job search is a countable activity for a maximum of 12
weeks in a fiscal year. Education and training is countable for one year in a lifetime. The
remaining activities that count for adult recipients are employment, subsidized employment, on-
the-job training, community service, work experience, and providing child care for the children of
a community service participant. Education beyond the one-year limit may only be countable in
conjunction with those activities more closely associated with work. States are also required to
sanction (penalize) recipients who do not comply with work requirements, though states
themselves determine the sanctions. Thus, the work standards reflect the policy goals of moving
recipients quickly from welfare to work. This recession is likely the first major test of these rules
for a prolonged period of high unemployment and lack of jobs.
ȱȱ
States cannot use TANF funds to assist a family with an adult recipient for more than five years,
though 20% of the caseload can be on the rolls for more than five years because of hardship.
ȱȱȱ
ŗşȱ

ȱȱȱȱȱȱȱ ȱȱȱȱ
ȱ
Again, this is a requirement on the state, not individuals, and states can use TANF MOE funds to
aid families beyond five years. States have considerable flexibility in implementing the time
limit, but it has influenced the design of state programs and most states do impose a time limit on
welfare receipt.
ȱȱ
Additionally, families on TANF cash welfare must assign (legally turn over) any child support
payments from noncustodial parents to the state. States can pass through that child support to the
family, but must bear a share of its cost. However, the family is not entitled to receive any child
support owed to it while it is on the cash welfare rolls.
ȱȱ
As mentioned above, welfare caseload trends have not always followed those of the
unemployment rate—an example is the 1980s when caseloads remained fairly constant after the
end of the 1981-82 recession. This might lead to concerns that possible expansions of caseloads
during the recession might not be fully temporary. However, there are large differences in policies
affecting the poor today compared with earlier periods. The returns to leaving welfare for work
are greater than they were in the 1980s—owed to both increases in the Earned Income Tax Credit
and other refundable tax credits tied to wages as well as the declining value of the welfare grant.
Still, concerns about increased welfare dependency might lead to a debate at the state level about
how to use the new ARRA funds. There could also be concerns that the rules of cash welfare –
that limit countable job search and require quick returns to employment—might not meet the
needs of families thrown into poverty by the recession. The temporary emergency fund can be
used to pay not only for traditional cash welfare, but also in different and innovative ways to
address the effects of the recession.
ȱȱȱȱȱȱȱȱȱȱ
The temporary emergency fund created by ARRA would reimburse states for 80% of the
increased costs of both non-recurrent short-term benefits and subsidized employment. Under pre-
recession, pre-ARRA TANF programs, states spent relatively few dollars on either type of
economic aid. In FY2006, states expended only $289 million on non-recurrent short-term benefits
and $103 million in wage subsidies to employers. Both forms of aid might be expanded to
respond to the recession, particularly if it is long and deep.
ȬȱȬȱȱ
Non-recurrent short-term aid is defined in regulations as benefits that (1) are designed to deal
with a specific crisis situation or episode of need; (2) are not intended to meet recurrent or
ongoing needs; and (3) will not extend beyond four months. This type of aid is defined as distinct
from ongoing cash welfare, and does not trigger requirements that apply when a family receives
cash welfare. That is, a family that receives only short-term aid is not subject to the TANF time
limit, is not included in the state’s TANF work participation rate calculation, and is not required
to legally turn over child support to the state.
ȱȱȱ
ŘŖȱ

ȱȱȱȱȱȱȱ ȱȱȱȱ
ȱ
Non-recurrent short-term benefits may take any number of forms. Some examples, include:
• Rental assistance, including security deposits, application fees, and payment of
back rent to avoid evictions;
• Moving allowance and loans to needy families to assist them in obtaining stable
housing; and
• Loans to needy families to provide stable housing, secure a car, or for other
reasons that are reasonably calculated to meet a purpose of the program.
The distinction between short-term non-recurrent benefits and ongoing cash welfare is not in
statute, but was created through HHS regulation. The line between short-term aid and ongoing
cash welfare is also not always clear. The Bush Administration in 2008 issued a program
instruction to states that attempted to restrict some activities states were claiming as “short-term”
benefits; they admonished states against classifying certain aid as “short-term” benefits just to
avoid the work participation standards applying to families receiving it.17 Still, the exemption
from TANF requirements for short-term non-recurrent benefits provides states and families
choices other than ongoing cash welfare to meet some needs.
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The ARRA temporary emergency fund will also reimburse states for 80% of the increased cost of
subsidized employment. That is, this fund can be used to support employment for otherwise
unemployed, needy parents. Just as with short-term non-recurrent benefits, if a family only
benefits from a wage subsidy paid directly from TANF to the employer, that family is not
considered to be receiving welfare, and TANF time limits, work participation standards, and child
support requirements do not apply.
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States may also use ARRA funds for increased “basic assistance” in ways other than expansions
of traditional cash welfare. For example, states can create community service programs for
unemployed parents and pay parents a stipend for ongoing basic needs. This would meet the
regulatory definition of “basic assistance,” thus making that family a basic assistance case and
those expenditures reimbursable from the ARRA emergency fund. Similarly, states could pay
families a stipend to attend a vocational educational training program. This too, can be considered
“basic assistance” use of ARRA emergency funds.
Though states could establish community service or vocational education programs distinct from
their regular welfare programs, these types of activities would technically come under the same
requirements as cash welfare and trigger time limits, work participation standards, and child
support assignment requirements. However, as discussed above, states have considerable leeway
in implementing time limits. Aid tied to activities such as community service or vocational
education could actually help a state meet TANF work participation standards (discussed above)
if the recipients of aid participate for a sufficient number of hours. Further, states could structure

17 See U.S. Department of Health and Human Services. Office of Family Assistance. Diversion Programs. Program
Instruction TANF-ACF-PI-2008-05 (amended), May 22, 2008.
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their community service or vocational education programs to pass through all child support to a
family with a member participating in such a program.
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The regular TANF contingency fund provides states that meet specified criteria of economic need
with extra, matching grants. The maximum contingency fund grant for a state is 20% of its basic
block grant. As of February 6, 2009, HHS reports that 12 states were drawing or were expected to
soon draw contingency funds. The 1996 welfare law established the contingency fund with $2
billion, and at the beginning of FY2009, $1.3 billion remained in the fund. One issue is whether
the $1.3 billion is sufficient to cover contingency fund costs for the duration of the recession.
Before the enactment of the ARRA, the Congressional Budget Office (CBO) estimated that the
contingency fund would remain solvent through FY2009, but run out of money in FY2010.
The availability of the temporary emergency contingency fund might affect these projections.
Still, it remains possible that the regular contingency fund could run out of money in the next two
years and Congress might seek to address that issue.
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States that fail TANF work participation standards are subject to a penalty through a reduction in
their block grant. The penalty is reduced based on how far away they were from achieving their
standard. The HHS Secretary may also reduce the penalty if a state failed the work standards
because they met the economic need criteria of the TANF contingency fund. Most states currently
meet these criteria.
HHS has yet to penalize states for failure to meet the FY2007 or FY2008 participation standards.
Any such failures occurred before the recession began, but states that failed these standards
would be penalized through a reduction in FY2009 and later block grants. Congress could either
eliminate or defer these penalties to avoid TANF funding cuts in the midst of the recession. (This
issue is not addressed in the ARRA.)

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Gene Falk

Specialist in Social Policy
gfalk@crs.loc.gov, 7-7344

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This report benefitted from the thoughts and comments of Karen Spar, Karen Lynch, and Thomas Gabe of
the Domestic Social Policy Division of the Congressional Research Service.

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